AFTER WORLD BANK’S REPORT ON WAGE GAP: SOME SALARIES MAY NOT CHANGE AFTER REVIEW

MBABANE – “If it is a good review, it should show us all the grades which are paid higher and state the years in which they should not be adjusted.”

Minister for Finance Neal Rijkenberg said this yesterday when explaining the action government will take to ensure that civil servants earn within a reasonable scale, following that the World Bank, through the Eswatini Public Finance Review, reported that salaries of civil servants are 50 per cent higher than those in the private sector.

He said if a grade shows overpayment, then the review report should tell us that, for the next four or five years there should be no increase  for that grade until the scales are right. Senior Country Economist for the World Bank Marko Kwaramba shared with government officials through Eswatini Expenditure Management, which entails how the country could strengthen public financial management to support fiscal consolidation and promote expenditure efficiency.The senior economist lauded Eswatini for coming up with the Southern African Customs Union (SACU) Stabilisation Fund, which has cushioned the country as the receipts declined in the next fiscal year.

Challenges

The senior economist stated that there is a need to address structural challenges in Eswatini to boost growth. He said the challenge lies in the wage gap between the public and private sectors. “In Eswatini, the gap is too large in such a way that civil servants are being paid more than the private sector,” he said. He emphasised that, compared to other countries, the public sector wage bill premium is high in Eswatini.

Kwaramba noted that the large gap between the public and private sectors in Eswatini impedes private sector competitiveness. This comparison was made with other countries such as Liberia, Ethiopia, Tanzania, Lesotho, Malawi and Namibia.These statistics, he said, were taken from the World Wide Bureaucracy Indicators (WWBI), which showed Eswatini to be among the countries with a huge gap. Eswatini was second to Namibia, which has a gap of around 70 per cent.

In Eswatini, the gap in salaries between the public and private sectors, according to the presented statistics by the economist and the PFR document, is said to be around 60 per cent, while Malawi has a gap of around 47 per cent.In light of this, Rijkenberg said government will be using the World Bank Report during the salary review, as the report had detailed the rate of civil servants in some countries and also explained the wage gap between the civil service and the private sector. There are over 43 959 civil servants, according to the Establishment Register, who support the Estimates of Public Expenditure for the 2024/25 financial year.

The minister said: “If the salary review report states that a particular grade is paid 20 per cent higher, I believe it will state also the method in which to ensure that the salaries are adjusted to the right market rate.” Rijkenberg said if it will be a good review, it should show government all the discrepancies in the remuneration of civil servants in the country.

The minister recently presented a national budget where E500 million was provisioned for adjustments of civil servants’ remuneration. This is despite that the current wage bill stands at E8.6 billion, as per the Ministry of Public Service Annual Report for the Year Ended 2024/25. The International Monetary Fund (IMF) in 2012 reported that the wage bill was bloated and advised government to implement the early voluntary retirement scheme (EVERS) in an effort to minimise it.

Transfers

Wages account for 10.4 per cent of spending, followed by current transfers spending at 5.9 per cent. By functional classification, general services stood at 7.1 per cent of gross domestic product (GDP), and economic affairs (which includes agriculture, energy and transport) at 6.5 per cent of GDP.
Public expenditure stood at 31.3 per cent of GDP in 2023, higher than most peers. For 2016 to 2022 averages, public expenditures stood at 28.6 per cent of GDP, much higher than the average for regional peers, which was 21.1 per cent, and structural peers, 25.5 per cent. 

Meanwhile, the PFR reported that in Liberia, the gap is just 20 per cent. It was said the average in other countries is 12 per cent, thus making Eswatini among those with a higher wage gap. Kwaramba explained that the 50 per cent gap between wage premiums, with the public sector being the highest in Eswatini, largely depends on the profession.  “At a lower level, the gap is not high, but at the middle level, it is high. However, if you are higher in the level, the gap is reversed. The gap is around 61 per cent higher in the public sector than in the private sector,” he said.

Kwaramba added that the average wage of a civil servant in Eswatini was 2.5 per cent higher than in the private sector. He said if the private sector, especially in the professions where the wage rate is lower than that of government, were to match that of government, it would erode profits and its competitiveness. The report also shows that recurrent expenditures make up the largest share of total spending at 25.1 per cent of GDP in 2023, whereas capital investment accounted for only 6.2 per cent.These jointly account for almost half of expenditure in Eswatini. The four critical spending areas include the public wage bill, health, education, social protection, public investment and transfers to State-owned enterprises (SOEs).

Uncompetitive

The report highlights that Eswatini has a large public sector, with one-third of GDP devoted to public spending.  The oversized role of government, coupled with an uncompetitive business environment and the high cost of doing business, has constrained the growth of the private sector. Although Eswatini allocates a larger share of GDP to public spending than its peers, its score on the 2020 Human Capital Index is relatively low at 0.48, well below that of Mauritius (0.62), Costa Rica (0.63), Estonia (0.78), Singapore (0.88) and the average for lower-middle-income countries (0.48).

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